From the FT comes a market shaking moment:
“QE in my view is less efficacious for the real economy than most people suppose,” said Mr Summers according to an official summary of his remarks at a conference organised in Santa Monica by Drobny Global, obtained by the Financial Times.
Mr Summers has emerged in recent days as a leading candidate to succeed Ben Bernanke as head of the world’s most important central bank. People briefed on the process say the Obama administration has framed its selection criteria in a way that makes Mr Summers, a former Treasury secretary, the obvious choice.
In his remarks in April, Mr Summers said it was likely either the economy would accelerate, or else estimates of its growth potential would have to come down.
“If we have slow growth, we are not going to keep thinking that 5.5 per cent unemployment is normal,” said Mr Summers. “We are going to decide rightly or wrongly that the potential of the economy is less and therefore we are going to decide that we are closer to that potential and that is going to operate in favour of suggesting that we should normalise interest rates.”
If this happens, stocks had better look out below. Meanwhile, as Calculated Risk recounts, everyone else’s favourite is Janet Yellen:
A few articles, from Cardiff Garcia at the Financial
Times: Why Yellen should be the next Fed chair, from Professor Richard Green writing at Forbes: Janet Yellen Would Be A Better Pick For Fed Chair Than Larry Summers, Tim Duy Fed Watch: Shock and Awe(ful), Mike Konczal at Next New Deal: Yellen, Summers and Rebuilding After the Fire, Felix Salmon at Reuters: Don’t send Summers to the Fed and Jon Hilsenrath at the WSJ: Fed Chief Choice Shapes Up as Race Between Summers, Yellen
And from former FDIC Chairwoman Sheila Bair writing at Fortune: Why Janet Yellen should succeed Ben Bernanke
[T]here is no better qualified candidate to fill Bernanke’s shoes when he steps down in January. A noted economist, Yellen headed the Council of Economic Advisors for two years; led the San Francisco Federal Reserve Bank for six years; and has served ably as Bernanke’s Vice Chairman since 2010. Unlike Larry Summers … she was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007.
If you read all those pieces – and ignore the criticism of Larry Summers – you’ll understand why Janet Yellen is such an outstanding choice for Fed Chair. She has all the skills, leadership ability, communications
Big choice.
